Principle Agent Analysis of Technology Project (LINCOS) in Costa Rica

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Munich Personal RePEc Archive

Principle-Agent Analysis of Technology

Project (LINCOS) in Costa Rica

Mamoon, Dawood and Hernandez, SIlvia

University of Islamabad

17 October 2017

Online at

https://mpra.ub.uni-muenchen.de/82010/

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Principle-Agent Analysis of Technology Project (LINCOS) in Costa Rica

By

Dawood Mamoon

Dean and Professor

School of Management and Economics University of Islamabad

(Harvard Business School Affiliate: 2013-2017) (George Mason University Affiliate: 2016-2018) (Member World Economic Survey Expert Group)

And

Silvia Hernandez

Former Deputy Minister of National Planning and Economic Policy Government of Costa Rica, Costa Rica

Abstract:

In this paper we analyzed the institutional arrangement between various actors to

understand how ICT project objectives flow among actors in a standard LINCOS project

and how they would affect the sustainability and effectiveness of LINCOS in particular and

an ICT project in general. Since there are many actors involved in different stages and

processes of a single LINCOS project, the paper analyses the bilateral and multilateral

relationships among these actors to understand the factors that might affect the efficiency of

the ICT project. In other words the paper looks at the actors involved in a LINCOS project

in an effort to capture those circumstances under which a LINCOS project is exposed to

principal- agent problems.

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1. ICT in Costa Rica

Today, when the technological revolution is transforming the lives of those who are

connected to it, the issue of access to information technology is becoming increasingly

relevant in every part of the world. Thus it is indispensable for a country to be prepared for

such changes (Human Development Report, 2001).

Costa Rica is one of the smaller Latin American countries, inhabited by only 4

million people. However, it is one of the more developed Latin American nations, known

for its social and cultural homogeneity, political stability and democratic traditions. It is also

one of the few countries in the world that does not have an army and instead, since 1949,

successive governments have channeled public resources to the improvement of general

public welfare rather than using them on amassing weaponry. Thus it is not a surprise that

today Costa Rica is one of the more developed countries among its regional counterparts,

with superior social and human development indicators (refer to table1.1) that it is definitely

a fine example to follow (Garnier 1998; Human Development Report, 2001).

Table1.1: Indicators of the Evolution of Social Development in Costa Rica 1940-2000

Indicator 1940 1950 1960 1970 1980 1990 2000

Adult Illiteracy (% of population older than 15 years old)

27.0 21.0 16.0 13.0 10.0 7.0 * 4.0 Years of Education (for more than 25 years old)

n.a. 3.1 3.6 5.3 5.9 6.5 *6.7 Life Expectancy (years)

46.9 55.6 62.5 65.4 72.6 75.6 *77.4 Infant Mortality (1000 births)

137.0 95.0 80.0 67.0 21.0 15 *10.2 Human Development Index (%)

n.a. n.a. 55.0 64.7 74.6 84.8 *79.7 n.a.: Not available.

Source: Garnier et al., 1998; *Estado de la Nación, 2004.

In the technology sphere, the country has also achieved positive technology

introductions as suggested in the 2001 Human Development Report; Costa Rica has

developed its human capital to utilize these new technologies efficiently. In effect, as the

Human Development Index shows, the country had shifted from a medium human

development level to a high one of almost 80% in the year 2000. For the same year, the

illiteracy rate was merely 4 percentage points (Garnier et al., 1998; Estado de la Nación, 2004)

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Irrespective of these overall national achievements apropos economic development,

one is confronted with a different reality when inter-regional differences are taken into

account because significant inequalities prevail between urban and rural areas of Costa Rica.

Table 1.2: Percentage of School Attendance for the Population over 5 years, per Region and Sex.

Costa Rica Urban Region Rural Region Age Groups Total Men Women Men Women Men Women

5-6 years old 64.6 64.4 64.8 72.1 72.3 55.4 56.0 7-12 years old 95.7 95.5 95.9 97.3 97.5 93.3 93.8 13-19 years old 61.3 59.9 62.7 69.0 71.3 47.7 50.4 20-29 years old 22.8 21.9 23.7 28.2 29.6 12.5 14.4 30 years old and more 4.6 4.4 4.9 5.8 5.9 2.5 3.0 Source: Population Census 2000, INEC

For example, Table 1.2 shows that, out of the rural population aged between 25 and

49, more than two thirds barely have 6 years of schooling, whereas in urban areas the

corresponding figure is less than one third. One of major reasons for this situation is the fact

that people do not have enough financial resources to afford education (refer to graph 1)

(Estado de la Nación, 2000:87). One way to make education accessible to the rural poor is to

make it cheaper and efficient by utilizing ‘new’ technologies.

Graph 1: Various Causes of Non-School Attendance of the Population between 5

and 17 years of age.

Ne e ds to work Proble ms to acce ss e ducation syste m C annot pay studie s Doe s not want to study

Se e studie s as to difficult

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There is a greater need of technologies that can provide access to information,

especially in the rural areas, and to reduce the digital divide.1 Information and

Communication Technologies (ICTs) can be identified as such technologies which, under

the right conditions (for example, effective use of it and equal access to it), can not only

improve the skills of the targeted population through better knowledge but also enable them

to have better income opportunities (Schech 2002; Rodriguez 2001; Colle 2000; Escobar

1995).

However, rural areas generally lack easy access to these Information and

Communication Technologies (ICTs) because of complex conditions. For example, because

of their remote geographical locations most rural areas have poor infrastructure, which

makes it difficult for the availability of ICTs (Okot-Uma, 1992 cited by Ghimire, 1997).

Therefore ICT provision to rural areas is generally a challenge and a tough task. But it is

necessary to take up this challenge because ICTs are cheaper and efficient modes of

knowledge dissemination, and this is a pre-requisite for the improvement in rural livelihoods.

Yet, the provision of ICTs generally involves many actors and as a result quite many

processes. These actors can be the State, a Northern NGO, a Southern NGO or both

and/or local communities, and these actors interact with each other at various stages of a

standard ICT project. In an effort to identify the most efficient ways of ICT provision, one

has to critically evaluate the role of these actors individually and/or in a group. For example,

it is imperative to know how different intermediaries2 as non-governmental organizations

(NGOs) come into action to play a role in the transfer of technology by implementing ICT

projects that can facilitate the access to various technology tools in areas where technology

introduction is difficult (Colle 2000).

This paper intends to look at one such intermediary NGO in Costa Rica, namely the

Costa Rican Foundation for Sustainable Development (CRFSD). This Foundation is an idea

of the former president of Costa Rica, Jose María Figueres Olsen who initiated an ICT

project called ‘the Little Intelligent Communities’ (LINCOS). CRFSD has also involved

various national and international aid agencies /donors in the promotion of its project.

1Is a shorthand term used to describe the widening gap between those who have access to a computer and

internet and those who do not (Microsoft Melinda Found, 2004)

2 There are different likes and dislikes for what an intermediary organization can be (Carroll, 1992:9)

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As a result, the CRFSD has to go through different steps before each LINCOS

project is finally implemented and considered ready for its use by the targeted population.

These steps form the project chain, which covers all the processes that a project has to deal

with, making up for the complete institutional arrangement whereby different relationships

and interests are covered and roles of different actors involved are identified.

The major focus of the study is to identify relationships between the various actors

involved in a standard LINCOS project and the way in which those relationships may have

influenced the efficiency of the project by looking at all the actors involved and the course of

actions taken by them.

There are ‘hard’ factors or material infrastructure requirements (e.g. components of

electricity, hardware and software platforms) to provide access to ICTs, and there is also a

need for the so-called ‘soft’ infrastructure (e.g. financial and negotiation factors) to support

the diffusion and the use of these technologies (Chepaitis 2002). This paper centers its

attention on the soft factors, which construct the institutional arrangement and, in particular,

it examines the relationship between the different actors involved in the ICT project. 3

For a better understanding, a graphic representation of the ICT project chain is

presented in figure 1 in appendix A. The chain provides a general overview of different

actors and processes involved in every step of the ICT project. Following the steps identified

in this ICT project chain, the paper attempts to show if the different actors are meeting the

project’s objectives and if they all have same objectives. This will also provide us with the

information to know how every step has defined the actual purpose of the project, even

though the purpose may be officially the same.

In this chain analysis, the paper seeks to identify the role played by the actors, giving

special emphasis to the NGO (CRFSD) and its relationships with the donors4, State5 and

3 Indicating ways of negotiations among actors. For studies of these soft factors such as negotiation

behaviors, see Schechter1998 and Solomon 1999).

4 Within this donors’ classification the paper will include: national and international foundations, private

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with the LINCOS’ management membership based organization (MBO). To this end, we

can consider the positive connotations and different problems that arise from different

actors’ interventions. Such an approach will help me to identify if some actors can lead to

the creation of new relationships of dependency, where some of them may have more power

to take decisions and impose conditionality on the others.

Since it is anticipated that (as it is the case now) the majority of the world’s rural population

will not own ICTs in the near future and most will probably not be direct users of ICTs -

many countries are trying to reverse such trends. ICTs are identified as an important means

of sustainable development and efficiency in communities - be they rural or urban.

To this effect, in many developing countries, a wide range of organizations –national

and international- are promoting and supporting the creation of entities that can make ICTs

available on an affordable basis to everyone. Much of this attention is now on “NGOs and

their initiatives toward applying ICTs and telecenters toward development” (Colle 2000:4).

In this paper, evaluation of the CRFSD as one of those intermediary entities, and the

analysis of its ICT project is used to understand what steps are involved in a project before

people get access to it. As mentioned earlier, an ICT project entails a chain of different steps

and actors before its outputs reach recipients. The analysis of any such steps that allow the

information to flow from a ‘top’ initiative idea to the ‘bottom’- to hitherto disconnected

people - provides a useful framework for any efficient ICT project implementation. Such an

approach gives an understanding of the processes that may delay or accelerate the ICT

connectivity to the rural people.

In short, ICT projects are worth analyzing to understand the institutional

arrangement that lies behind them, especially since the analysis of such partnerships and

relationships in ICT projects have not been covered extensively by the existing literature

(Brehm 2001).

5 The difference between state and government is well known, however for the present paper the two terms

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It was possible for me to gather good background knowledge about my case study as

I have been working with the CFRSD. It has been both a challenge and a moving learning

exercise to explore the relationships between the NGO and the donors, the state and the

community management based organization (MBO) as actors involved in LINCOS.

The objectives of this study are to:

a) Identify those steps in the structure of the project that may delay or accelerate the

access of information to the targeted population;

b) Analyze the NGO objectives in relation to those of its partners, donors, State and

the community organization (MBO) involved. (Does everybody want the same

thing? Do objectives of the NGO clash with those of the donors and do these

differences influence the objectives of the NGO? How are actors influencing the

project?)

This research seeks to examine some of the factors thatmay inhibit or foster access to ICTs.

There will be a further focus on other specific sub-questions:

a) How do objectives of the ICT project flow among the actors and why? (What

happens at the end of this process?

b) What factors in the institutional arrangement account for the delay or progress of the

ICT project and why? (How long does it take, what does it mean in terms of time

and why? i.e. contract agreements, requirements, etc)

c) Are changes in the project, if any, caused because the presence or absence of particular actor/s (i.e., donors/state)?

2. Methodology

This study is based mainly on secondary data to illustrate the case of the steps

involved behind an ICT project and its analysis with a principal-agent perspective.6

Principal-agent theory is been chosen because it can identify different relationships among

actors involved (Stiglitz 1998). Whereas, the role of these actors may depend on who sets up

the rules and which one is willing to accept them. As a result, sometimes the interests of a

principal (the donors) can influence the interests/objectives of the agent (NGOs). This is

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because there may be uneven situations of information from one actor to the other (Stiglitz

1998). It is therefore important to look at the objectives of the project to understand if they

match with the interests of the particular actors involved.

Principal-agent theory also helps to understand the role of each actor, shedding light

on the reasons why their objectives are similar or different. There can also be the case

(depending on the circumstances) that an actor that is playing the role of a principal becomes

the agent for another actor and similarly the agent becomes the principal for another actor.

Such a situation will most probably arise while moving down to another stage on the ICT

chain. In short, by using principal-agent methodology, the paper tries to analyze whether the

original objective of any ICT project changes because of the actions taken by different actors

in different stages.

The secondary data for the analysis has been collected through literature review from

websites and library materials in the Netherlands. The case study was assessed on the basis

of published and unpublished reports, articles, and other material from the studied NGO.

Also, some primary data was gathered by interviews and email communications with the

main actors involved in the project, by arranged contact from the NGO.

Since the study concentrates on the soft structure of information access of an ICT

project, it does not look at the impact of this project in the communities. Therefore, the

paper does not pay major attention to the positions of the communities or the beneficiaries’

reaction and the way they will make use of the information and communication

technologies. Rather, it focuses on the ways in which these ICT services are provided to the

people that need the information in the shortest possible time that facilitates the service

delivery.7 Looking at the way actors operate will assess this service delivery. Therefore, this

research will also be of help for anyone interested in the role of the actors behind any NGO

project.

Since this work is based mainly on secondary data with the use of the CRFSD

project’ files, it is imperative to acknowledge that I myself did not participate in the process

of the material creation, which may lead me to diverse conclusion problems. Also, there is

always the possibility of not having access to some information, even though all the previous

negotiation was carried out. The key concepts of the study are: Information and

7 “Providing a service is just the starting point in a chain of events that should ultimately end in an increase

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Communication Technologies (ICTs), Non-Governmental Organizations (NGOs) -as the

ICTs performer of the presented case- and their relationships with Donors, State, and

MBOs. This is evaluated with a Principal-Agent Theory Analysis.

3. Defining Information and Communication Technologies (ICTs) through Literature

“ICT encompass all those technologies that enable the handling of information and

facilitate different forms of communication among human actors, between human beings

and electronic systems, and among electronic systems” (Hamelink, 1997:3). This technology

‘reflects the convergence of digital computing and telecommunications’ (Heeks 2002:1),

which are the means to serve the goals of the information handling and communication.

Different ‘old’ and ‘new’ devices for the information delivery such as computer, radio, and

telephones among others, can hold the use of this technology.

It is widely believed that ICTs are a means to enhance people’s well-being (Heeks

2002; Schech 2002; Colombo 1989). This public welfare is achieved through knowledge

sharing that enables people to improve their skills as a means for empowerment. This

empowerment extends opportunities for employment, which will improve their life

conditions. Evidence indicates that ‘ICTs can be highly beneficial to individual communities,

projects and countries as under the right circumstances ICTs can improve education, health,

job creation, governance and other services’ (Rodriguez 2000:5).

However, merely acknowledging that information can provide many opportunities

for those who need it is not enough. This information should be provided as effectively as

possible. There is the belief that for an effective usage of ICTs, the question of digital divide

has to be addressed by incurring extensive investment in the ICT infrastructure. The second

critical step is to shift from learning to ‘learning-to-learn’, as in the age of modern ICTs,

most information is on-line, and what is really required is the skill to know what to look for,

how to retrieve it, how to process it and how to use it, thus transforming information into

knowledge and knowledge into action (Castells 2001). Only after such actions, which lead to

the provision and optimal utilization of ICTs, can it be said that information technology

causes social well-being.

Yet, this involves many underlying assumptions. The most vulnerable set of assumptions

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technology should not only be equally available to the people from all the stratum of income,

but that they are also well capable of utilizing it. These assumptions do not hold in reality.

Firstly, there is an enormous and augmenting partition between the have and have not of

ICT infrastructure. As Saith so aptly states:

“The empirical evidence, revised as it is continuously in order to keep track of a fast moving target, all

confirm the existence of a chiasmic divide: this applies to the different elements of ICTs; and then for

comparisons between continental regions; within advanced and poor economies; within each country to

the enormous gaps between rural and urban populations; within urban regions to wide divide between

the megapolitan centres and large cities on the one hand and the small towns on the other; within cities

to the different categories of suburbs that house different social groups” (2001:4).

Thus, there is a clear case of digital divide between and within countries and where

variations of the wealth distribution are noticeably from rural to urban, which hampers the

effectiveness of ICTs (Castells 2001; Colle 2000).

Additionally, illiteracy problems and social discrimination prevailing in societies limit the

use of ICTs even where they are made accessible to a common person: ‘Since ICT skills are

largely based on literacy, it seems that the vast majority of the illiterate population which are

largely poor will be excluded from the emerging knowledge societies, whereas the worse

shall be women who constitute the major chunk of illiterates in the world’ (Hamelink 2000:

iii).

Here then, the question that arises is why there is still a profound gap between technology

needs and availability in rural areas? How can ICTs fill the gap in those deficit areas? These

questions lead to a major concern with who is implementing ICTs and in what way it is

implemented? Since it may be the case that, despite good intentions regarding a project,

some actors are not playing properly their role.

To this effect, in order to examine the ways in which ICTs can be delivered to people,

one has to look at the role of the different intermediaries that play a crucial role in its service

delivery strategy. These intermediaries can be broadly identified as NGOs, Donors and the

State. Before analyzing the role of these actors in ICT development, it is useful to first

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how these actors are linked with each other in an institutional framework for the promotion

and implementation of a development project.

3.1. What are Non-Governmental Organizations (NGOs)?

According to many authors, NGOs have become important actors in the last

decades (Biekart 1999; Edwards and Fowler 2002; Carroll 1992; Korten 1990; Padrón 1982,

Macdonald 1997; Smillie 1995; Thomas and Allen 2000) serving as intermediaries for donor

agencies and governments by having a strong presence in needy communities around the

world.

It is important when analyzing NGOs to understand how accountable they can be to

the people they are helping. However, a critical definition of NGOs and their distinctions

must be presented first.

It is difficult to find an adequate definition of NGOs. They embrace also many

different organizations ranging from “political action committees to sport clubs” (Carroll

1992:9).

Therefore, a special distinction of NGOs is made between those organizations

performing developmental assistance and those involved with social commitment in

“grassroots work”. The former are grassroots support organizations (GSO), which are

NGOs providing assistance to different communities as intermediary agencies (Carroll

1992:9). For some authors, these organizations are also known as non-governmental

development organizations (NGDO), which are also within the NGOs category but with an

attitude more towards development (Padrón 1982).

Grassroots organizations (GRO) on the other hand are NGOs that are not working at

the supra regional level as GSO. They are only concerned with their own community

assistance, thus seen as community organizations (Arrosi et al. 1999) or ‘peoples’

organizations’ (Korten 1990). Within these GROs there are grassroots based organizations

(GBOs) and membership organizations (MO) (i.e. member based organizations (MBOs),

whereas the main differences between this group and the GSO lies in the way they gain their

support and their accountability structures. GRO followers also call them self-help groups,

since they are entities that gather their results by making use of their own resources and by

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…any action undertaken by an individual or group of persons, which aims at the satisfaction of

individual or collective needs or aspirations. The distinctive feature of a self-help initiative or activity is

the substantial contribution made from the individual’s or group’s own resources in terms of labor,

capital, land and /or entrepreneurial skills…a self-help group is also a membership organization which

implies that its risk, costs and benefits are shared among its members on an equitable basis and that its

leadership and /or manager liable to be called to account by membership for their deeds’(1994:45).

There are a wide variety of classifications according to the nature of entity; NGOs

can also be grouped as northern governmental organization (NNGO) or southern

non-governmental organization (SNGO) depending on their headquarters’ location or from

where the assistance is coming from (Bebbington and Farrington 1991 in Bebbington et al.

1993:6).

Furthermore as the term indicates, non-governmental organizations are not entities

from government, though in reality many NGOs receive funds mainly from them (Thomas

and Allen 2000:210). They become contractors and not independent actors, since most are

not financially self-sufficient but in need of resources. The same situation is seen with

donors and NGO relationships. NGOs have been acting as intermediaries in developing

countries where government or donor funds are available, becoming implementing agencies

for big donors in the aid chain (Biekart 1999:38-40).

Apart from understanding the typology of NGOs, an evaluation of their work

should be offered since there are many examples that can be attributed as positive and

negative effects from the work of NGOs.

NGOs aim to alleviate problems present in the majority of developing countries,

especially in rural development (OECD 1998). Even though these problems can be

attributed to different circumstances, NGOs have developed different networks to improve

any existing situation. Today, their work is concentrated in the help they can provide to

community development. This assistance can be direct or indirect by providing resources

that were lost by natural disasters or by the introduction and implementation of projects to

impact a large range number of people. Also, communities are relying on them to gain access

to resources because of the lobbing capacity that many NGOs have, (Riddell and Robinson

1995).

However, in the majority of cases these NGOs’ projects are pre-designed and

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cases NGOs act as intermediaries to northern organizations or donors that want to utilize

the same project models in south countries. Hence, the project may not have positive

impacts (such as local ownership) because of different characteristics and necessities of the

place where it will be implemented as compare with the one where it was first set. As a

result, different situations such as cultural and political factors can show the disapproval of

some NGOs’ work (Rozendal 2003). Besides, many times project developers are not

considering other aspects such as remunerations schemes, which have negative aspects when

leaving apart. As Riddell and Robinson suggests “well-trained field staff, motivated by a

reasonable level of remuneration and committed to the goals of the organization, clearly play

a critical role in successful interventions…poorly paid staff have cause to be less committed

to the projects they are managing or executing, and will be tempted to spend more project

time engaged in moonlighting activities” (1995:71). Finally and in contrast, projects should

not leave behind the idea that “too many staff will have objectives that are too broad and

shallow” (Heeks & Baark, 1998:26).

Consequently, for a better perception there should also be an assessment on NGOs

accountability.8 Here, the question is to whom NGOs are accountable? Are they

accountable to their partners, to the communities they target, to donors, to governments, or

to the coordination bodies in which they participate? To some extent they are accountable to

all of them, but the unequal power relations they engage in must be acknowledged (Carusi

2003:11). As Thomas and Allen have stated, “NGOs are in practice more accountable to

their donors than they are to the beneficiaries” (2000:213). Biekart (1999) also argues that in

the aid chain the most powerful actors are donors (i.e. northern governments) at the top of

the aid chain and they control strategic decisions in the negotiation process.

INTRAC work describes this accountability issue by pointing out their concerns for the

way in which, some local NGOs are being held accountable by communities:

“After initial enthusiasm for supporting local NGOs as intermediaries to empower the popular

organizations of Civil Society, questions are now being asked about their accountability to these

organizations. Might they even weaken Civil Society? Have we witnessed a disproportionate support for

local NGOs at the expense of popular organizations…making the latter dependent on local NGOs as

intermediaries for access to resources? Local NGOs increasingly tend to present popular organizations

8 “Accountability is understood as the degree to which members (or citizens) can hold their leaders (or

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in policy discussions with donors and, in turn, have attached a professional middle-class cadre of

‘experts’. By funding and promoting local NGOs, are we in danger not only of encouraging

opportunism but also of undermining even the more productive role that government might play in

developing countries?” (Bennett and Gibbs 1996:4).

On the whole,NGOs’ ties to some actors may lead them to different priorities where the

course of projects get changed or interrupted. Hence, this difference of priorities that may

be present in the institutional arrangement is what calls for the analysis of the relationships

among different actors.

3.2. NGOs, State and Donors: An Overview

After going through the above analysis, in this paper NGO refers to organizations

that engage in providing support to different communities. Therefore, the Costa Rica

Foundation for Sustainable Development (CRFSD) refers to a grassroots support

organization (GSO) or Southern NGO (SNGO), and the LINCOS community

administrative organization is referred to GRO, or MBO definition.

After the end of cold war, bilateral and multilateral lending agencies have pursued a

so- called ‘New Policy Agenda9’ that identifies NGOs such as GROs as one of the most

prominent means for poverty alleviation, social welfare, democratization and healthy civil

society. They are also considered to be key channels for the promotion of pluralism and

human rights protection.

At the same time, the developing country states are viewed by these aid agencies as

generally lacking resources or commitment to ensure universal coverage of social welfare for

the public. Furthermore, the state’ failures are attributed to their interventionist policies. For

example, in ‘rural development projects’, the tendency for state institutions to centralize

decision-making led to growing classes of urban-based functionaries, hierarchical decision

making and so reduced flexibility and responsiveness and to inappropriate and slow program

implementation at local level (Ahmad 2000:15). In short, there are state failures in many

developing countries due to an inefficient allocation of resources at national level, and

particularly to rural and urban sectors and private and public sectors. In view of the good

history of NGOs in providing welfare services to the poor people in those countries where

9 ‘New Policy Agenda’ is term coined by Robinson (1993) whose beliefs are based on neo-liberal

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governments failed to ensure universal coverage in health, education and security, the new

liberal paradigm has scrapped the Keynesian model of development where the state and its

agencies were assumed to be the key vehicles through which projects and policies were

implemented.

Traditionally, donor finance has been channeled into various development projects

through NNGOs. However, this trend is increasingly changing as the SNGOs’ competence

and capacity is improving. Now, SNGOs increasingly receive funds from many different

sources including NNGO partners, international foundations and official bilateral and

multilateral donors, whereas donors also support SNGOs indirectly through NNGOs. The

change of focus from NNGOs to SNGOs is also due to the fact that this arrangement suits

both donors and the developing country state. Donors prefer SNGOs because they are

assumed to be more accountable, better performers, and more effective in strengthening

civil society in the South than their Northern counterparts (Bebbington and Riddell 1994).

In the case of NNGOs, the developing country state does not have much leverage to

address these concerns and might consider their actions a threat to its legitimacy or

sovereignty. Many NNGOs look to influence southern state policies through operational

collaboration, lobbying and advocacy. On the other hand, a range of interventions can be

used by the state to influence indigenous NGOs in the South. They can involve restrictive

measures like investigation and coordination, deregistration or even closure or they can

provide incentives like tax exemption status, access to policy makers and public funding

(Hulme and Edwards 1997).

3.3. Conceptualizing Institutional Arrangement between NGOs, State, GRO/MBOs and Donors

The role of NGOs in economic and social development cannot be understood

without taking into account the nature of their relationship with other actors that participate

in the non-governmental social development initiative. This paper identifies these actors as

the developing country state, donors (including NNGOs), NGOs (including SNGOs or

GSOs) and GROs (including MBOs).

Figure 2 below shows the direction of the relationship between these actors and the

kind of control or influence each of them can have on others. First, it should be recognized

that though actors may work together, their objectives can vary and that one actor might

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categorized as some officially stated goal like poverty alleviation and national economic

development or there can be some hidden agenda like access to foreign markets or simply to

influence another actor through persuasion, financial inducement or direct coercion (Hulme

and Edwards 1997).

Figure 2: Actors Relationships

Donors Developing Country State

Southern NGO

(Grassroot Support Organization)

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3.4.1. NGO and Donors Relationship

For example, in the case of the NGO-donors relationship, the donor’s objective can

vary according to its orientation. In the context of this paper, donors can be categorized into

three groups: (a) private enterprises, (b) multilateral or bilateral aid agencies or foundations

and (c) academic institutions. The objective of private enterprises can be to access the

foreign market, whereas aid agencies and academic institutions would normally work for

certain development goals identified in neo-liberal economics. They collude to participate in

NGO activity in the developing country by providing finance, technical assistance (i.e.,

exchange visits) or other material resources irrespective of differentiation in their goals

(Hulme and Edwards 1997:7-8; Riddell and Robinson 1995:67).

3.4.2. NGO and State Relationship

Here, donor initiatives force developing country states to participate in an NGO

activity to ensure state legitimacy is not weakened. According to Farrington and Bebbington

(1993), if anything, State and NGOs are ‘reluctant partners’. This seems to be the case in

many countries, but in many instances the relationships are more complex and prone to

extreme variations. For example, Bratton (1989) argues that African States have generally

adopted a control-oriented approach towards NGOs. In Kenya, the State is more concerned

with larger NGOs present in cities and undertaking urban programs whereas smaller NGOs

working in remoter rural areas and are allowed to operate with a much higher degree of

‘autonomy’ as they do not threaten the state (Anangwe 1995). Though in some other

countries the state appears to be more flexible, this flexibility is due to the preferences of

specific regimes (Perera and Wanigaratne cited by Hulme and Edwards 1997). So, State and

NGO relationships are case sensitive and call for a more detailed case study analysis to

understand how states envisage different NGOs.

3.4.3. NGO and GRO/MBO Relationship

The basis of the NGO and GRO relationship comes with the choices NGOs face in

project implementation. It is up to the NGO whether it wants to involve itself directly with

individual households or to channel its programs through GROs, which make up for more

efficient links to the poor. In the case of SNGOs in particular, the choice of GRO root

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community-based organizations (CBO) according to a standard format, which these SNGOs

believe it optimal because “it facilitates mass outreach and helps reduce administrative costs”

(Hulme and Edwards 1997:15).

However, irrespective of their operational preferences for optimal outcomes,

Hashemi (1995) believes that the only way for NGOs to be more relevant to the poor is if

they become accountable to those for whose welfare they are working. This is quite

contrasting with the general practice where NGOs are seen to be more accountable to their

donors or for that matter, the state. In short, to be efficient, “NGOs have to make a choice;

between the four wheel drive vehicle that comes with government licensing and donor

funding, and the much harder conditions involved in living along side poor people”

(Hashemi 1995, quoted by Hulme and Edwards 1997:15). To this effect, ‘the question

whether [NGOs or to this matter SNGOs or GSOs] are concentrating on their linkages to

states and donors to such degree that their relationships with the poor are being eroded

remains the most critical one’ (ibid). This question will form the basis of our analysis in and

the paper will discuss the case of the SNGO under investigation ‘CRFSD’, which is also

involved with other actors creating an institutional interdependence.

3.5. Principal-Agent Theory: The Research Method

Today principal-agent theory has seen practical application in nearly every area of

social science. It captures the dynamics of a relationship between two entities, two

individuals or two parties where one is recognized as an agent because he/she is expected to

perform certain duties identified by his/her principal who is bound to keep part of the

commitment towards the agent (Halachmi 2003). For example, in the developing world, institutions like non-governmental organizations (NGOs) can be agents of autonomous

funding institutions like the World Bank or IMF or public funding agencies like government

banks or they can be agents of multinationals donors. In short, an agent is employed to act

on behalf of another called his principal, so that as a rule the principal him/herself becomes

bound.

However, there is a caveat: According to Halachmi (2003), it is impossible to observe

all actions and decisions of the agent or to infer them by observing the outcomes of agent’s

decision. This leads to a principal agent problem, which arises because of imperfect

information constraints, either concerning what action the agent has undertaken or should

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3.5.1. Principal Agent Problems: Moral Hazard and Adverse Selection

It is customary to distinguish two types of informational constraints in

principal-agent theory: moral hazard and adverse selection. Moral hazard refers to endogenous

variables that are not observed by the principal. Stiglitz (1998) defines moral hazard crudely

through credit relationships between lenders and borrowers. According to him, in credit

relationships moral hazard arises when the actions of the borrower can affect the probability

of default. Laffont and Tirole explain moral hazard as discretionary actions of actors (i.e.,

NGO) that affect the cost or quality of their project. These discretionary actions can be

allocation of perks by the managers (hiring personnel to lighten their work loads, inattention

to excessive inventories of inputs, etc), indulgence in activities that privilege their career

potential over efficiency, purchase of materials and equipment at high prices are a few of the

negative efforts arising from moral hazard. Adverse selection arises when an agent has more

information about exogenous variables than the principal. In general adverse selection allows

the agent to extract a rent from interaction with the principal even if his/her bargaining

power is low. Laffont and Tirole (1993) explain that an actor (State, Donor or NGO) is

faced by adverse selection when it is only known to the MBO or the community whether its

cost for a given level of cost reducing activity is high or low. Since a regulator, who must

ensure that the MBO supply certain services, must also guarantee that the MBO is willing to

participate in implementation and execution of the project (even if it faces intrinsically high

costs), the MBO must enjoy non-negative rent even if the project they are working in is

inefficient. This leads to the possibility of adverse selection as the MBO could lower its

cost-reducing activity below the socially optimal level and produce at a high cost that would have

been its cost has it been inefficient. This slack provides the MBO with more utility that it

would have had, had it been inefficient, and hence with a strictly positive rent.

4. Setting the Scene: An ICT Experience in Costa Rica 4.1. LINCOS---A Project Description

As discussed earlier, a series of initiatives related to the application of ICTs has been

initiated in Costa Rica with the idea of introducing the use of communication technologies

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Entebbe)in partnership with Massachusetts Institute of Technology (MIT) and the Costa

Rica Institute of Technology (ITCR) initiated the LINCOS program in 1998.

CRFSD was created as a non-profit organization, in 1993. Today, is mission is ‘to

promote the use of technology applications that enhance peoples’ well-being, within a

framework of Sustainable Development’ (CRFSD 2004).

LINCOS is a project meant primarily for the poorest marginal urban communities

and rural areas, which, according to CRFSD, are the main locations that do not have access

to technology platforms and other basic technology infrastructures (LINCOS [Multimedia]

2000). The LINCOS project involves the installation of a services unit, which works as a

telecenter10 with multiple applications available to its target beneficiaries that are children,

adults, small and medium size farmer’s producers, local small business, medical patients

among others, whereas in full operation LINCOS could service over 4,000 people per

month. (LINCOS [Multimedia], 2000).

This LINCOS units’ structural design consists of a used shipping container -

disposed of by a shipping company - that is about 20 feet long and 9 feet wide with a canopy

added on top to provide shade and water protection. It is modified with doors and windows

and normally configured with six computer stations and a small ‘laboratory’ inside (see

appendix B for drawings). According to CRFSD, this container box and its size were

selected because of ‘its convenience, security, and portability,’ by minimizing the

environmental impact and benefiting communities where it gets permanently installed

(LINCOS 2004). However, in 2003 CRFSD decided together with the Digital Nations

Consortium11 to change their focus on containers by taking LINCOS to second-generation

phase following a permanent evolution strategy whereby the project services can be placed if

the community so wants by using: a community center, school (not necessarily recyclable

containers) in an effort to focus mainly on community and educational aspects (LINCOS

2004).

10The Telecentres consist of a physical infrastructure that allows the access to the information and

communication services by connectivity” (Gómez et al., quoted in Tschang, 2002: 130).

There are different types of telecenters, one of those are the multipurpose ones as LINCOS, which can provide a wide range of applications (ranging from telephony to internet connectivity) for individual, social and economic development. It is important to acknowledge that according to CRFSD, LINCOS differs from telecenters in some aspects, but for the purpose of this paper LINCOS is going to be assessed as a telecenter to facilitate the understanding of its concept.

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4.2. Project Dimensions:

Currently, the LINCOS project is no longer a pilot project and has already been

introduced in two Latin American countries (Costa Rica and the Dominican Republic) with a

total number of 18 units working in different rural communities. For example, three units

have been set up in three different rural locations of Costa Rica12, and the rest have been

located since 2000 in 15 different rural communities of the Dominican Republic.

In the case of Costa Rica, LINCOS projects have been implemented through donor

initiatives, while in Dominican Republic they have been implemented through the national

government.

LINCOS units are capable of attending the needs of over 4,000 inhabitants per

month,13 providing them various services.The following table gives the average capacity of a

LINCOS unit for the various services it offers, per week, per month and/or per year.

Table 4.1: Capacity of one LINCOS unit

Type of Service Offered Quantity of People Attended/Unit

Per week Per month Per Year

Educational computers to girls and boys between the ages of 7 an 14

240 1008 12,096

Educational Information Systems for people 15 years old and older

174 731 8,772

Lab services use for Educational Information Systems 59 248 2,974

Information Window and community services 65 260 3,120

Soil and Water studies -- 20 * 240

Teleconferences 560 ** 2352 28,224

Total per Unit 1.098 4,829 77,448

Note:

*/ It is estimated that the service can be offered to five persons per week

**/ There is a 40 persons capacity for the video conferences, twice a day, seven days a week Source: Lincos web site. www.Lincos.net

The table shows that a standard LINCOS unit makes available various ICT-oriented

services (banking, trade, local agriculture information, etc) to an average of 1,739 inhabitants

per month, including school students as well as adult population living in or near the

community where the project is introduced.

12 - San Marcos de Tarrazú community (Southern Region-Rural), 2000.

- San Joaquín de Cutris, San Carlos (Northern Region- Rural), 2001. - Río Frío (Atlantic Region –Rural), 2002.

13 This capacity is set as a reference by CRFSD as result of LINCOS historical information in communities

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On average, LINCOS can also perform 20 soil and water studies per month, which

can be utilized for myriad of purposes, i.e., early disease detection and sickness control or

better agricultural practices. Last but not least, LINCOS also contain a teleconference and

entertainment component which generally serve a group of 40 people, twice a day, seven

days a week. This enhances cultural levels, creates ‘new’ forms of entertainment and help,

giving the possibility of communicating with the world (CRFSD 2004).

4.3 Steps and Processes to Deploy LINCOS Units.

Implementing this project, involves various steps that correspond to the execution of

a LINCOS unit in a community. These steps and processes are the ones constructing the

chain under analysis (see Figure 1, in appendix A) and they are outlined as following in detail.

Step 1: Introduction of the Project Process 1: Overall Assessment.

LINCOS was the brainchild of CRFSD where the original objectives of the project

were set up. When the idea was still on paper, CRFSD initiated contacts with donors and

government officials of the participant countries where the project was to be implemented.

National evaluation/surveys were undertaken to establish economic, social, technological,

cultural educational and environmental conditions. At this stage, every community that

might potentially participate in the project was identified.

Process 2: Community Assessment and Selection.

This activity involved evaluation/surveys to identify the communities where the

LINCOS units could be fully integrated. Each community that could benefit from the

project needed to fulfill a range of requirements and responsibilities. Once these

requirements were met, CRFSD together with Rochester University would proceed with the

elaboration of the community assessment or Rapid Assessment Process14 (RAP), carried out

in participation with the different actors in the community, with the idea of creating a

strategic and operative work plan for the project’s implementation. Thus, “each community

will have access to only those applications (refer to appendix C, for application details) that

are seen feasible for them, enabling every LINCOS project to have its distinct features

14It is a feasibility procedure for community assessments, implemented in LINCOS by Rochester

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depending on the community requirement and CFRSD and its actor’s assessment report”

(LINCOSa [second-generation internal file] 2003).

Step 2: Construction and Installation Process 3: LINCOS Unit Construction.

As soon as the ‘Assessment and Community Selection’ takes place and the relevant

social and economic studies are initiated, the construction of a LINCOS unit begins.

Process 4: Unit Transportation.

Transportation will begin as soon as the first units are ready for shipping to their

respective countries/regions. However, prior to transportation, there must be a guaranteed

site selection that meets the criteria set in the original plans. Transportation includes packing

and sea or land transportation, unit arrival, local transportation to the sites, final deployment

on the selected site and the final tests.

Process 5: Community Selection of Administrative Organization and Site Preparedness.

Here, an “administrative” member based organization (MBO) needs to be selected

for the execution of the project as well as the coordinators working in different LINCOS’

applications by the community and the CRFSD with mutual consensus.

This activity also involves the identification of sites where the units are to be installed

for the selected communities. Besides this identification and preparation of the site, the

construction of necessary infrastructure such as restroom facilities, telephone wiring and tap

water among other activities are requested from the community.

Step 3: Economic Sustainability Process 6: Financial assistance.

At this stage, different entities interested in the project participate. Since ICT

projects are costly, the main financial actor is generally the government. Nevertheless,

operation and maintenance costs are generally covered by private actors including

companies, foundations and others (see tables 3.3 and 3.4 for costs information).

Step 4: Training, Assimilation and Use Process 7: Training

This process is done after Step 3 has been accomplished. Here the CRFSD provides

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Process 8: Assimilation and use of LINCOS units

Once the previous steps are completed, LINCOS is put into operation by making

use of the different available applications chosen according to community needs.

Step 5: Monitoring aspects

Process 9: Monitoring and Evaluation

Regular evaluations are performed to ensure objectives of the project match with the

identified needs of the community. This facilitates better control over those activities that

take place along the project’s operation.

4.4 Required Resources for project Implementation:

As the financial process indicates, financial assistance must be requested to cover the

required costs in order to implement the project. Table 3.3 provides an estimation of the

base costs of LINCOS (initial fixed costs involved in the execution of a standard LINCOS

unit).

Table 3.3: Base LINCOS costs

Item Cost –in US$- Costs Unit construction $20 000

Cost of technologies (an average of 35 technologies such as equipment, labs, computer programs, material, etc) $25 000 - $60 000

Cost of the preliminary studies (RAP for the communities) $5000 Cost of training process (average of 6 one-month courses for

20 people) $20 000 - $50 000 Cost of the unit transportation to the site and customs duties $5000

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According to table 3.3, the base cost to execute a LINCOS project, on average,

ranges from $82 000 to $150 000, depending mainly on the number of units installed, the

location of these units, transportation,15 lodging and training of the program’s technicians,

equipment and, most importantly, the number of applications involved (see table 3.2,

appendix C).

In addition, there are some operational (variable) costs that must be considered. The

most prominent operational costs are land rent/buy to install the unit, power supply costs,

internet access, and unit coordinators’ salaries (see table 3.4 for one unit costs).

Table 4.4: Other Operational Costs

Item Cost -in US

$-Personnel in charge of LINCOS unit 13,100

LINCOS Operator 4,800

Assistant for laboratory and video Conference 2,400

Assistant for heath, environment and Information 2,400

Technician 3,500

Publicity 3,500

Land cost 20,000

Operative Cost 3,100

Light 420

Water 240

Telephone 480

Internet 3,600

Supplies 420

Gardens 300

Maintenance 600

Other maintenance costs 240

Visitors 900

Transportation 900

Unexpected 5% 2,235

Total 46,935

Source: CRFSD 2000 [internal file - estimation for one community].

Because of the high costs involved, CRFSD has mobilized various national and

international actors to finance each LINCOS project. There are academic alliances such as

those with the Media Lab at the Massachusetts Institute of Technology (MIT), Rochester

School of Medicine’s Center for Future Health, the Harvard Center for International

Development, INCAE, Universidad de Costa Rica -the University of Costa Rica-, Universidad

Nacional de Costa Rica -the National University of Costa Rica and the Instituto Tecnológico de

Costa Rica -Costa Rican Institute of Technology (ITCR)- among others. In addition, there is

15 There is also the case that units can be installed outside the home country as it has been done in

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also the contribution of different national and international companies and corporations,

which form part of the project’s strategic partners. To identify some of them, we can

mention the Hewlett Packard Corp., Microsoft Corporation, Alcatel, Motorola Co. and Banco

Nacional de Costa Rica –National Bank of Costa Rica-. There is also assistance from the

national government as which is an important actor and provides the physical infrastructure

that a community requires for the implementation of technologies. Lastly, the contributions

of some international foundations as the Discovery Channel Global Education Fund, the

Rockefeller Foundation, the Costa Rica – United States of America (CR-USA) Foundation

for cooperation, the AVINA Foundation and the Flora Family Foundation are part of this

project (LINCOS 2004).

These actors/project-supporters participate in different ways and their contributions

depend mainly on the type of application that the project is introducing. It should also be

noted that not all the actors mentioned above are necessarily involved in a particular

LINCOS project and that a donor contributing in one community or specific country may

not be part of another.

4.5 Selecting the Main Actors from the Project:

The participation of actors depends on the specificities of each step and the

processes required by those steps. Although every actor plays an important role, in this paper

we concentrate on those who have either provided significant academic assistance or a

substantial financial contribution to the project and can significantly influence in some way

the course of the project.

To justify the selection of certain actors from the project, an evaluation of their

contributions to LINCOS is presented below. First, a summary of these actors participating

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Table 4.5: Primary Actors16

Steps Actors Involved Contributions

o In-kind

 Financial

1. Introduction of the Project Center for Future Health at Rochester University and MIT.

o Rochester University: RAP designs and

faculty advisory for this component.

o MIT: Development and use of

Constructionist Methodology17.

Participation of master and PhD level students in the development of applications/technologies for communities.

2. Construction and Installation MIT, ITCR o MIT and ITCR with canopy designs and

container’ platforms construction. Computer (hardware/software) selection / approval.

3. Economic Sustainability CR-USA, BNCR, Discovery and State

 CR-USA: Financial assistance for computers’ acquisition and others devices for the introduction of the first LINCOS second-generation concept in Rio Frío community.

 BNCR: Funds requested for services’ provision.

 Discovery Channel: Videos provision subsidies.

 State: Dominican Republic Government provided the funds for their 18 LINCOS units.

4. Training, Assimilation and Use INCAE  INCAE: Together with CRFSD, training

courses.

5. Monitoring aspects INCAE o INCAE: Impact evaluations and

business trainings.

Source: Author’ own construction by using the information presented in reports, Internet and other related sources to the project.

4.5.1 Donors Descriptions

After above selection, a description of the main donors is offered to give a better

idea of their objectives or mission.

16 It is important to note that the classification of actors presented in this table was the reality at the time of

writing this paper. It is possible that positions may have shifted from what they were in the past, or may change in the future, such that the actors may find they are misrepresented at a later time.

17 Proposed by MIT and it suggests that users construct –with available computer tools- meaningful

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From academic Institutions:

The Technological Institute of Costa Rica (ITCR)

ITCR is a Costa Rican public institution of higher education in technology. It was

established in 1971, becoming the first technological university in Central America. Its

mission is ‘to launch strategic actions to consolidate its national and regional leadership in

the fields of technological education, innovation policies, and transfer of technology

focusing on productive sectors, regional projection, and potential international cooperation’

(ITCR 2004). ITCR became LINCOS strategic ‘partner’ a few months later after the CRFSD

initiated the idea in 1998.

The Central America Institute of Business Administration (INCAE):

In 1964, the business community and the governments of the Central America

founded INCAE. It is a private, non-profit, multinational, higher education organization

devoted to teaching and research endeavors in the fields of business and economics aimed at

training and instructing from a worldwide perspective. Its mission is ‘to actively promote the

comprehensive development of the countries served, enhancing leadership skills within the

key sector by improving management practices, attitudes, and values’ (INCAE 2004).

INCAE has been working with LINCOS since 2000 by given technical and monitoring

assistance. Thus, INCAE provides in-kind services to CRFSD instead of providing direct

financial assistance. For example, master and doctoral students from INCAE come to

CRFSD installations to carry out evaluations that in most cases are part of their research

papers.

The Media Laboratory at the Massachusetts Institute of Technology (MIT):

The MIT Media Lab is both an academic department and a research laboratory and

operations started in 1985. The research program is funded by over 300 of the world’s

largest companies, with a total volume of almost $30 million per year (LINCOSc 2003

[internal file]). The focus of this research has historically been human-machine systems, and

now explicitly includes a strong research agenda for sustainable development. The Media

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The Center for Future Health at the Rochester University:

The center for future health is a collaborative effort of the School of Medicine at the

University of Rochester and the MIT Media laboratory (Rochester University 2004). It is

dedicated to the creation of a system of intelligent devices that can be used worldwide and

will enable people to monitor changes in their own health and compensate for physical

limitations. The center conducts research in a problem-centered and interdisciplinary way in

order to achieve personal health technology goals. The idea is that this allows progress to be

made in areas where solutions require such disparate expertise that standard research

approaches fail. Its objective is ‘to provide a platform of inter-operability on which to

develop a large array of health devices for personal use, permitting their clinical testing and

then allowing rapid transfer to industry’ (Rochester 2004). The center has joined the

LINCOS project in collaboration with the University of Rochester and MIT since year 1999,

one year after the project started.

From Companies/Corporations: The National Bank of Costa Rica

As a public bank, its mission is ‘to become the country’s financial partner by provision

of secure and excellent services’ (BNCR 2004). The bank emphasizes activities where it has a

clear competitive advantage. BNCR was ‘invited’ to become a donor of LINCOS by helping

with their funds to meet its operational costs in LINCOS, San Marcos de Tarrazú. This

contribution was to be mainly for the implementation of Discovery Channel videos.

From International Cooperation Agencies/ Foundations: Discovery Channel Global Education Partnership

Discovery channel recently –April, 2004- changed its name replacing “foundation”

with “partnership”, thus becoming Discovery Channel Global Education Partnership

(DCGEP). According to them, ‘the latter word more accurately states the nature of the

organization’ (Discovery Channel 2004). This is a non governmental organization, a public,

non-profit entity that works with partners and donors to bring to scale a grassroots

education project in order to make positive difference in under-served communities around

Figure

Table 1.2: Percentage of School Attendance for the Population over 5 years, per Region and Sex.
Table 1 2 Percentage of School Attendance for the Population over 5 years per Region and Sex . View in document p.4
Figure 2: Actors Relationships

Figure 2.

Actors Relationships. View in document p.17
Table 4.4: Other Operational Costs
Table 4 4 Other Operational Costs . View in document p.26
Table 4.5: Primary Actors16
Table 4 5 Primary Actors16. View in document p.28
Figure 3: LINCOS community MBO

Figure 3.

LINCOS community MBO. View in document p.32

References

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